International Outdoor v City of Troy (6th Cir. September 4, 2020)

My last entry had to do with billboards, dealing with an interesting case from the Fifth Circuit Court of Appeals.  in this case is similar. I should mention also that both cases were brought to my attention by Sam Edwards, who has been really scouring the advance sheets for new and interesting cases.

International Outdoor v City of Troy, decided by the Sixth Circuit Court of Appeals, issued just yesterday, September 4, 2020, parallels the case we reviewed in the last entry. In this case, the trial court dismissed the a claim of prior restraint made by the sign company against the city because the claim had been mooted out as a result of some changes made to the sign regulations during the pendency of the litigation. I will not discuss the mootness issues although they are certainly interesting.

More interesting however in the context of this blog is the impact of Reed v Town of Gilbert, 576 US 155 (2015). I won’t get into the factual allegations beyond saying that the sign company alleged in particular that some signs were exempted from having to apply for a permit at all (including flags, temporary signs, real estate signs, garage, estate or yard sale signs, noncommercial and political signs, holiday or seasonal signs and construction signs were all included). In a footnote, the Sixth Circuit indicated that taking the complaint in the light most favorable to the plaintiff, the sign company alleged facts showing that it incurred costs that other applicants were exempt from because its proposed signs were not afforded the same favored treatment under the ordinance. From the standpoint of the Sixth Circuit, this conferred standing.

As I mentioned in the previous entry, because the Reed court concluded that “strict scrutiny applies either when a law is content based on its face or when the purpose and justification for the law are content based, a court must evaluate each question before concludes that the law is content neutral and thus subject to a lower level of scrutiny.” Reed at 166. The Sixth Circuit concluded that intermediate scrutiny generally applicable to commercial speech applies only to a speech regulation that is content neutral on its face. That is, a regulation of commercial speech that is not content neutral is still subject to strict scrutiny under Reed.

Much as the Fifth Circuit did in the Reagan National Advertising case discussed in the last entry, the Sixth Circuit then turned to look at several other circuit court decisions many of which concluded that the intermediate standard applicable to commercial speech still applied. See Central Hudson v Public Service Commission, 447 US 557 (1980). The Sixth Circuit distinguished many of those cases, and also pointed to Barr v American Association of Political Consultants, 140 S Ct 2335 (2020) applied strict scrutiny to a content-based restriction on robo calls to cell phones. In addition, the Sixth Circuit pointed out its own decision in Wagoner v City of Garfield Heights, 577 F. Appx 488 (6th Cir. 2014), cert granted and judgment vacated, 135 S Ct 2888 (2015). The Sixth Circuit had applied a practical test for assessing content neutrality concluding that in the Wagoner case, the city had satisfied the intermediate scrutiny applicable to such regulations. The Supreme Court did not agree, reversed, and remanded for consideration of Reed. This reversal by the Supreme Court had the act of solidifying the Sixth Circuit's conclusion that in the absence of content neutrality, the strict scrutiny test must apply.

In addition, the court also referenced its decision in Thomas v Bright, 937 F. 3d 721 (6th Cir. 2019), also discussed in the prior post, in which the owner of billboards in Tennessee challenged the on-premise restrictions found in the Tennessee Billboard Act. The Sixth Circuit invalidated the act as being contrary to Reed.

While the court acknowledged that both Wagoner and Thomas concerned non-commercial speech, "the regulations in both cases were deemed unconstitutional due to their content-based nature: they required an inspection of the message to determine whether it was political, as in Wagoner, or related to any on-premises activity, as in Thomas, in order to determine the sign’s permissibility under the regulations.”

In this case, the District Court concluded that the speech at issue, erecting advertising billboards, was commercial speech and therefore not subject to strict scrutiny. Furthermore the District Court held that the ordinance provisions satisfied intermediate scrutiny under Central Hudson.

But the Sixth Circuit reversed because it felt that the district court applied the wrong standard. The Sign Ordinance imposed a content-based restriction by exempting certain types of messages from the permitting requirements, such as flags and temporary signs and the other signs I’ve listed above. Thus, the ordinance regulated both commercial and non-commercial speech but treated them differently, requiring the city to consider the content of the message before deciding which treatment should be afforded. For content-based restrictions on speech, strict scrutiny applies, not intermediate scrutiny.

Accordingly, the Sixth Circuit reversed the decision of the District Court dismissing the plaintiff’s claims against the content-based restrictions found in the sign regulations, and remanded for consideration of the Reed analysis.

Okay, then the question here is how often do you see such distinctions between flags, real estate signs construction signs, yard sale signs, holiday signs political signs where such signs are either required to obtain no permit, or have some lesser burden in obtaining permission. Fairly frequently it seems to me. Under this Sixth Circuit case, it seems that such differentiation may be entirely unlawful.

Speedy Cash: Vested Rights, Estoppel and Standing

In a decision filed on April 22, 2016, Chancellor Ellen Hobbs Lyle ruled that a cash advance financial institution had established an equitable estoppel which prevented Metro Nashville from revoking a permit which had erroneously been issued. The case, Concord Finance, Inc., d/b/a Speedy Cash v Metro Board of Zoning Appeals and Tennessee Quick Cash, Inc., Docket #15-1362-III, is extremely interesting inasmuch as its result is very unusual.

I will summarize the facts quickly although the opinion is quite lengthy and in these vested rights/estoppel cases, the factual setting is always the most important. Having said that, the essential  facts are that Speedy Cash applied for a building permit in September 2014 to renovate and remodel an existing convenience market on Dickerson Pike. While the application for the building permit was pending, the Metro Council amended the zoning ordinance in a way which would prohibit the location of a cash advance retail store at that location. Ultimately Metro Codes decided to go ahead and issue the permit notwithstanding the passage of the new zoning regulation. The construction was virtually completed when on April 21, 2015, the Metro Zoning Administrator issued a stop work order and revoked the building permit. The stop work order noted that the permit had been issued in error. Speedy Cash had spent approximately $600,000 in the construction effort.

Speedy Cash appealed the decision to the Metro Board of Zoning Appeals, but the administrative body upheld the decision of the Metro Zoning Administrator. From there, an appeal was taken pursuant to the common law writ of certiorari.

The court looked at three different issues: vested rights and the pending ordinance doctrine, equitable estoppel, and standing. It is worthwhile to read the entire opinion, but again, I will very briefly summarize the decision of the court.

The court found against Speedy Cash with regard to the vested rights doctrine. The court found that the undisputed facts indicated that the new zoning ordinance became effective on November 19, 2014. The building permit was not issued until December 2, 2014. "Issuance of a permit for a building that does not comply with the law renders the permit illegal and, therefore, invalid and of no effect as of the date of its issuance…" Slip Opinion at 12.

The court engaged in some additional analysis based on the pending legislation doctrine, but frankly, I think the summary above encapsulates the significant holding. Ultimately, if a building permit is issued in violation of the existing law at the time of issuance, it is simply void and of no effect. It doesn't make any difference how much construction was completed or how much it cost.

The court then turned to the equitable estoppel argument. Once again, the law is not favorable for Speedy Cash. The equitable estoppel doctrine applies only very rarely to governmental entities. The court cited Sexton v Sevier County, 948 S.W. 2d 747, 751 (Tenn. App. 1997) as an example. There are many others.

However in this case, the court concluded that Metro's conduct clearly induced and caused detrimental reliance by Speedy Cash and given the fact that the building was completely constructed and its design customized for use as a cash advance retail outlet, the doctrine should apply. The important facts related to the original hesitation by Metro Codes to issue the permit, a review by Metro Codes, and a final decision indicating that the permit would be issued and in fact was issued, because it was "grandfathered" in. Most likely, that determination was incorrect; but its effect was to induce the applicant to move forward with the construction effort and spend a very significant amount of money.

Accordingly, the court found in favor of the applicant (Speedy Cash) and reversed the decision of the Metropolitan Board of Zoning Appeals.

Finally, one remaining issue was determined by the court. A competitor, Tennessee Quick Cash appeared before the Board of Zoning Appeals and also participated in the arguments before the Chancery Court. Tennessee Quick Cash admitted that it did not have a store within a quarter mile of the Speedy Cash location. The court noted that in order to have standing, Tennessee Quick Cash must show a direct and palpable injury, a special injury not common to the public generally. City of Brentwood v Metro Board of Zoning Appeals 149 S.W. 3d 49, 58 (Tenn. App. 2004). Tennessee Quick Cash argued that its status as a business subject to the same regulatory structure as the petitioner gave it standing. The court concluded however that the threatened injury necessary to confer standing in a zoning case must be related to the use of the property – dust, noise, traffic, or something similar. Nothing like that appeared in the record with regard to Tennessee Quick Cash, and it certainly didn't flow simply from being a business competitor. Therefore, the court concluded that Tennessee Quick Cash had no standing to speak before the Board of Zoning Appeals and had no standing before the Chancery Court.

This final holding is somewhat unusual, but certainly understandable. It reinforces the concern that any land use attorney has when representing a business competitor who is not located within a short distance from the project itself. In this case, the court used a quarter of a mile, and as it happens, that is my usual rule of thumb: I always look to see if my client (or conversely, an opponent to my client's project) is located within a quarter of a mile of the proposed project. There are some Tennessee cases which suggest 2000 feet, and certainly if your opponent is located that far away that's even better, but a quarter of a mile has always seemed to me to be a reasonable distance. If the objecting party is located more than a quarter of a mile away from the project, there's a pretty strong likelihood that there is no standing.

Anyway, this case gives us three valuable lessons on zoning law. First, vested rights are hard to establish under the Tennessee common law, where you need both a building permit and substantial construction. But more than that under the circumstances of this case, even if you obtain a building permit and even if you engage in substantial construction, if the building permit itself did not comply with the existing law at the time of the issuance of the permit, the permit is most likely void and there are no rights to vest.

Remember also, that the Tennessee Vested Rights Act became effective after the events in this case, on January 1, 2015, but it probably would not have made any difference. The Tennessee Vested Rights Act,  Tenn. Code Ann. §  13-4-310 (b)-(k), requires only the issuance of a building permit, and unlike the common law, it does not require any construction in order to vest. But, once again, if the building permit was void at the time of issuance by virtue of the fact that it did not comply with the zoning or other land development regulations in effect at the time of its issuance, then there are probably no rights which have vested even pursuant to the terms of the statute. The building permit must comply with the local regulations, and if not, it is not very helpful in future litigation.

The second lesson is that even though it is extremely unusual, every once in a while, given unusual facts, an equitable estoppel can be made out against a local government. It doesn't happen often, but from time to time it can be very effective.

Finally, and perhaps a more frequent issue which can come up in virtually any zoning board hearing, the standing of a business competitor is certainly undercut by the Chancellor's decision. The business competitor needs to demonstrate that it is within a short distance from the project, like anyone else, or have some other overwhelming reason that it should have the right to contest the project. Otherwise it simply lacks standing to participate.

Local Government Standing

I mentioned back in late April that there were two local decisions of the Davidson County Chancery Court dealing with the standing of the local government to sue its own board of zoning appeals. One of our judges ruled that Metro Nashville could sue its own zoning board, while another ruled the other way. I have just obtained a copy of the latter decision, and it is posted here for review.

It is likely that both cases will be reviewed by the Tennessee Court of Appeals so that they can be decided consistently.

Can a local government sue its own zoning board?

The legal question concerning whether a local government can sue its own board of zoning appeals seems to be gaining steam. First, my own case, Cheatham County v Cheatham County Board of Zoning Appeals and Randall and Margaret Mooneyhan, was decided last November. The issue was not directly addressed in that one however by the Court of Appeals because the County withdrew its appeal shortly before the oral argument before the court, and the only issue which remained was whether attorneys’ fees should be awarded to the Mooneyhans. However, in addressing this issue, both the majority and concurring opinions seem to clearly indicate significant doubt about the ability of a local government to sue its own board.

Meanwhile, over in Collierville, in a case involving the non-conforming status of billboards, the zoning board evidently voted not to require the owner to take the offending billboards down, and the Board of Mayor and Alderman have voted to sue the zoning board in order to have the billboards removed. This turn of events arises out of an interesting decision issued previously by the Tennessee Court of Appeals, Abbington Center v Town of Collierville (Tenn. App. 2012). We previously discussed this case.

Here in Nashville, there are two other cases with the same issue involved. In Metro Nashville v Metro BZA and Lamar, the local government suit its own board of zoning appeals arguing that its decision finding the replacement of a mechanical sign face with a digital sign face was not permitted under the terms of the local zoning ordinance and was not protected by the Tennessee Non-Conforming Property Act, Tenn. Code Ann. §13-7-208. Among the issues raised, was the propriety of a suit by the local government against its own zoning board. The Davidson County Chancellor, Claudia Bonnyman, ruled in favor of Metro Nashville, finding that the local government could sue.

However, just last Friday, in a case styled Metro Nashville v Metro BZA and CBS Outdoor Inc., CBS filed a motion to dismiss raising the same argument, but the local government lacked standing to file suit against its own zoning board. This time, a different Chancellor, Carol McCoy, concluded that the local government could not sue its own board of zoning appeals.

Both cases, as you might suspect, are going up on appeal. There are certainly policy arguments on both sides. The ultimate answer to the question may rest with the Tennessee Supreme Court.

Can a county sue its own zoning board?

I had prepared this post about a week ago, before the county dismissed its appeal as a result of finding an amendment to the zoning regs that makes clear that my clients were right all along. As a result, the most interesting aspects of this case are now not going to be argued. There remains an issue about attorneys' fees, which is certainly important, but is not the subject of this post. I thought I'd post my thoughts on the standing issue, because from time to time, this issue does come up.
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On Thursday, October 25, I have an argument before the Tennessee Court of Appeals involving two interesting issues: first, under what circumstances may a home be constructed on a noncomplying lot, and second whether the County can sue its own zoning board when it disagrees with its conclusion. Setting aside the first issue until some later date, the standing question is certainly fascinating.

In this case, Cheatham County contends that its zoning board granted a variance to my clients which the County believes was illegal. For our part, we don’t believe that the variance was necessary at all, that the board was simply applying the County zoning regulations and correctly at that. The County filed the appeal and the trial court indicated that the County did have standing to appeal a decision of its own zoning board. However, the trial court ruled that the zoning board acted properly and affirmed its decision.

Now the County has appealed to the Tennessee Court of Appeals, again arguing that the zoning board improperly granted a variance. My clients contend on appeal that the zoning board properly overturned the building code official’s decision to revoke the building permit, but that in any case that Cheatham County has no standing to prosecute this appeal.

The statute, Tenn. Code Ann. § 27-9-101, requires that a person be aggrieved in order to file such an appeal; the petitioner “must be able to show a special interest in the agency’s final decision or that it is subject to a special injury not common to the public generally.” Trosper v Cheatham County Planning Commission, 2010 WL 175094 (Tenn. App. 2010).

But assuming for the moment that the County does not own property in close vicinity to the property applying for the permit, should the County otherwise be permitted to appeal? In City of Brentwood v Metro Nashville Board of Zoning Appeals, 149 S.W. 3d 49 (Tenn. App. 2004), the Court of Appeals specifically approved an appeal by the city of Brentwood concerning a decision by the Metro Nashville Board of Zoning Appeals. But in that case, the appeal is somewhat understandable: these are two different governmental entities, which may have different policies and procedures. If the agency of one government improperly approved a development, it certainly does not seem unusual that the adjacent government might contest the issue.

But here we have a County government suing its own zoning board, a board which has no other legal existence other than as a part of the County itself. Furthermore, it would certainly seem that the County could solve whatever problem might be caused by the zoning board’s decision by simply amending it zoning regulations to preclude that from ever happening again. In my case, I believe that the true issue is permitting a mobile home in this area the County; by amending the zoning regulation to prohibit mobile homes on less than 5 acres, it would not happen again in the future. So there are certainly an alternative method of resolving this difficulty in the absence of an appeal to court.

Another interesting quirk under the circumstances is the fact that most counties do not bother to retain counsel for their zoning boards when they sue them. So for example, in my case, no one is arguing that the zoning board properly granted these variances. My clients are arguing that the zoning board granted relief appropriately but the variances were a necessary. The zoning board has no attorney. No one is arguing for its position.

On the other hand, the County did retain special counsel to challenge the decision of the zoning board. The County’s attorney is being paid by the County for his efforts to overturn the zoning board. It seems drastically unfair for the County to pay a lawyer to overturn the zoning board’s decision without at least making some effort to provide counsel to defend the zoning board’s position. In fact, it were not for the fact that my clients felt strongly about this issue, the case would likely have been overturned without opposition whatsoever because of my clients had not been willing to pay for my services, there would’ve been no opposition to the lawsuit.

From my perspective, the County suing its own board of zoning appeals is like the County suing itself. It’s the same entity. There is nothing for the County to sue about, there is no harm done to the County’s interests, and there should be no standing.

This case however will likely not turn on that broad general issue. In the papers filed with the trial court, the County neglected to make allegations concerning the basis for its standing in this case. It is far more likely that the Court of Appeals, even if it finds the argument regarding standing to be legally sound, that it will rule that the failure of the County to specifically allege the grounds for its standing in this case prevents it from concluding that the County did have standing. In other words, it will be a somewhat narrow ruling rather than the broader ruling I argue for above. Certainly, that’s fine for my clients' position. They win either way if the court rules in that fashion.

But this is nevertheless an interesting issue. Can the County appeal a decision of its own zoning board? Certainly, if he can, there should be some procedural safeguards built into make sure that the zoning board has some type of representation on appeal.